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State chamber asks for repeal of new taxes

Jim Pumarlo, the state chamber’s director of communications talks with Daily Globe staff Monday morning.

WORTHINGTON – When state legislators reconvene this morning, members of the Minnesota Chamber of Commerce hope one issue quickly comes to the forefront.

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Three new sales taxes on business-to-business enacted in 2013 should be repealed as early in this year’s legislative session as possible, said Jim Pumarlo, the state chamber’s director of communications, in a visit Monday to the Daily Globe. Pumarlo was joined by Jim Nickel, chair of the Worthington Area Chamber of Commerce’s Government Affairs Committee, along with Worthington Excavating Owner/President Susanne Murphy and Worthington Area Chamber Executive Director Darlene Macklin.

Pumarlo explained that Minnesota Gov. Mark Dayton had originally proposed numerous new taxes for consideration during the 2013 session, resulting in the creation of the United for Jobs Coalition, an organization now comprised of 96 business trade organizations and local chambers of commerce. Dayton dropped his business-to-business sales tax plan in March, Pumarlo said, but “11th-hour dealmaking” at the conclusion of the session brought three new such taxes on the books.

Effective July 1, 2013, taxes began being collected on labor service charges for repair and maintenance of business equipment, as well as purchases of telecommunications equipment by telecommunications providers. Sales taxes on storage and warehousing services of business-related goods will become effective April 1.

These new taxes are already having a significant impact on Minnesota businesses, Pumarlo said.

“There’s a company in Chaska that will pay $50,000 in sales tax just on labor,” he said of the new tax related to repair and maintenance of business equipment. “The tax on telecommunications goes at cross purposes with the recommendation of the governor’s task force on expanding broadband in the state. … Storage and warehouse is a very mobile industry with a lot of short-term contracts, and these taxes are especially concerning for border communities, or if you have a company that has facilities in multiple states.”

Murphy said that taxes on labor required for repairing Worthington Excavating equipment have amounted to more than $37,000 in less than a year. Such costs make it a challenge to maintain its employee numbers and keep a successful business operating in Worthington, she added.

Nickel explained that the new taxes also hit farmers hard.

“We are a rural community, and this really affects our farmers,” he said. “If you need an overhaul on a tractor or a combine and you’ve got a $10,000 to $20,000 repair bill, it (added taxes) is very substantial.”

Pumarlo suggested that the harm being done to the state’s business climate is far greater than the difference the new taxes make in the state’s general fund.

“These business-to-business taxes raise over $300 million, and that represents less than 1 percent of the state’s general fund and less than 50 cents out of every $100 the state collects,” he said. “Yet, the impact on these business sectors is significant. … You might be trying to protect the every-day Minnesotans, but you aren’t.”

With the announcement in December of a $1.086 billion state budget surplus, Dayton announced that repeal of the three new taxes would be a priority for him in the coming legislative session. A new budget forecast is due Friday, and Pumarlo said there’s no shortage of optimism about another healthy surplus figure.

“You talk to any economist and they’ll say business-to-business taxes are really poor policy,” Pumarlo stated. “We’re saying, bottom line, it makes Minnesota businesses less competitive. It makes it tougher to do businesses, and we ask that they be repealed – and repealed early in the session.”

“If a new business is coming into our state, this is just one more tax we have to inform them about,” Macklin added.

Other top state chamber priorities for the upcoming session point to a world-class, skilled workforce to ensure economic growth; developing a consensus and leading the statewide business community’s position on transportation; stressing that environmental permitting and review programs promote economic development while protecting natural resources; and setting the minimum wage at $7.25 per hour to conform with the federal rate.

Daily Globe Managing Editor Ryan McGaughey may be reached at 376-7320.

Ryan McGaughey

I first joined the Daily Globe in April 2001 as sports editor. I later became the news editor in November 2002, and the managing editor in August 2006. I'm originally from New York State, and am married with two children.

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